Cheers,
Mark
From: "Dana Shills" <[email protected]>
To: [email protected]
Subject: Re: st: 2SLS and Instrumental Variables
Date sent: Fri, 10 Dec 2004 14:29:35 +0000
Send reply to: [email protected]
> Thank you Prof. Schaffer and Prof Williams.
>
> I understand that the instruments might be collinear but I thought to
> be good instruments, there should be no direct paths from the
> instruments to the dependent variable Y1, only indirect paths through
> the endogenous regressor Y2. So if the instruments do come out
> significant, then are they not valid instruments? What am i missing
> here?
>
> Thanks again
>
> Dana
>
> >>>Perhaps because of the loss of degrees of freedom and/or
> multicollinearity between the Zs? Try a test of the joint
> significance of Z1-Z4.
>
> >>>>>>That is my first inclination too. To take a more extreme
> >>>>>>example, suppose you had a hundred yes/no questions. Their sum
> >>>>>>(i.e. the number of yes answers) might well have a significant
> >>>>>>effect. That does not mean that if you entered all 100 items in
> >>>>>>a regression that any one of them individually would have a
> >>>>>>significant effect.
>
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Prof. Mark E. Schaffer
Director
Centre for Economic Reform and Transformation
Department of Economics
School of Management & Languages
Heriot-Watt University, Edinburgh EH14 4AS UK
44-131-451-3494 direct
44-131-451-3296 fax
44-131-451-3485 CERT administrator
http://www.sml.hw.ac.uk/cert
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